India’s Investment Focus: Oversold Sectors, Not Market Decline
Ajay Srivastava, managing director of Dimensions Consulting, argues that India’s investment narrative focuses on specific oversold sectors, rather than a general market decline. During an interview with NDTV Profit, he noted that several high-growth areas are currently trading at expensive valuations.
Srivastava believes the banking sector has likely reached its trough, pointing to the continued resilience of mid-tier banks. He also stressed the need for investors to adjust their growth expectations and valuation premiums in certain sectors, such as contract development and manufacturing organisations (CDMOs).
Although the CDMO segment is performing well, Srivastava warned that raised valuations are a worry. He argued that the strength of business performance must be balanced against the price investors are paying for future growth.
Srivastava emphasized that the timeline and growth outlook for India’s investment story must change. This is happening as investors deal with pockets of sectoral weakness alongside companies commanding premium valuations.
These remarks follow a mixed outlook for pharmaceutical firms in the September quarter. Domestic formulations are becoming a primary growth engine, even as US generics businesses struggle with pricing pressure.
Based on Deven Choksey Research’s Q2FY27 pharmaceutical preview, domestic formulations are anticipated to grow faster than the 10% growth recorded for the previous year across its coverage universe. The Indian Pharmaceutical Market expanded 13% during the first two months of the quarter, aided by volume recovery and growth in chronic therapies.
Firms like Zydus Lifesciences, Sun Pharmaceutical Industries, and Laurus Labs are projected to outperform the domestic market. Additionally, the increasing role of anti-diabetic therapies, including the GLP-1 opportunity, serves as another potential growth driver.
Conversely, US generics remain under pressure due to price erosion, declining Revlimid sales, and increased competition. Cipla and Alembic Pharmaceuticals are forecasted to be laggards, while Cipla and Dr Reddy’s Laboratories confront margin pressures from US operations.
Srivastava also advised against assuming that the artificial intelligence-led market trend will continue forever. He stated, “AI trend to not last forever like any other trend.”
His remarks highlight the importance of differentiating between durable business growth and investment themes that may have already drawn too much optimism. For investors, the focus should be on identifying sectors where valuations have adjusted enough, rather than following trends based solely on current market narratives.
